How Cannabis Just Took A Step Towards Legalization In The U.S. Farm Bill

President Trump signed a new $867 billion farm bill into law on December 20th, 2018. The Agriculture Improvement Act of 2018 was passed with strong bi-partisan support in both the Senate (87-13) and the House (369-47). While the details of the bill include provisions that generally continue the current farming and nutrition policies, there was a little wrinkle that caught cannabis investors attention. It legalizes cannabis. Well, not the cannabis you are probably thinking of but the bill is the first real step the federal government has taken towards legalization almost 50 years.

What Is Cannabis?

The first thing we need to define is what cannabis is. I’m trying to be cute with that statement. The terms Cannabis, Marijuana and Hemp have been used in different ways depending on the point of view of the writer. Even in in scientific literature, it isn’t very clear with arguments abounding about where the line between strains and species exists. Generally speaking, we can say that cannabis is a genus of plants with 3 species – Cannabis Sativa, Cannabis Indica and Cannabis ruderalis. The first two are types that a consumer might see highlighted in any marijuana dispensary. As we said, it is argued in some circles that these are not different species as all, but would better be characterized as different strains. So, there is some understandable confusion for the layman as to where that line is. Whatever your definition, species or strain, cannabis with high levels of THC, the chemical that makes users high, remains illegal under the new law so there is no reason for advocates of legalization to get too excited…yet.

What is legal?

This bill legally defines ‘hemp’. Generally speaking, the Federal Government has not made any distinction between strains or species of cannabis in the past. They were all illegal. The most interesting part of the 1,006-page bill is the last page. It amends the Controlled Substances Act of 1970 concerning marijuana for the first time. Specifically, it refers to a new definition of “hemp” as being any C. Sativa plant that has THC below 0.3% on a dry weight basis. This bill does not legalize cannabis in full, but it does legalize strains with low THC.

Legalizing strains that are low in THC is important for the nascent cannabis industry. Why? THC is not the only reason to grow cannabis. The plant has widely been cultivated through history for a variety of uses such as rope and canvas. It was widely grown in the mid-west during World War II for industrial uses. The US government even made a propaganda film during the war called ‘Hemp for Victory’ to encourage its growth. The 13-minute film was almost lost to history. At one point the film was scrubbed from US records and the US government denied ever making it. But a copy was found and is now in the US Archives under record ‘1682’. You can watch it here on YouTube.

Most importantly for the cannabis industry, Hemp is a great source of CBD. CBD is another chemical produced by cannabis, but it does not get you high. CBD is being touted as a wellness drug and consumer goods companies are looking to incorporate it into everything from pills to sports drinks. The list of potential benefits from this drug include treatments for epilepsy, pain-relief, anti-inflammatory and anti-anxiety. CBD has been legalized in some form or another in all but 3 states – Idaho, Nebraska and South Dakota. So legalizing its production, even with significant oversight, opens the door for legal cannabis growing in the US in a way that has not been available to farms, companies, and consumers since the at the Controlled Substances Act of 1970. Some would argue that hemp was essentially made illegal with the Marijuana Tax Act of 1937 which drove the industry out of business, prompting the ‘Hemp for Victory’ video as sources in the Philippines were under Japanese control.

This bill offers a legal new path to growth for cannabis producers in the US. By some estimates, the CBD market is already a billion-dollar industry in the US. Passage of this bill opens the door for that market to greatly expand, offering revenue growth, funding for R&D and new products for consumers. And for the first time in a long time, I can say that (some) cannabis is legal in the US.